Inflation targeting and inflation convergence: international evidence

Philip Arestis, Georgios Chortareas, Georgios Magkonis, Demetrios Moschos

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    Abstract

    We examine whether the inflation rates of the countries that pursue inflation targeting policies have converged as opposed to the experience of the OECD non-inflation targeters. Using a methodology introduced by Pesaran (2007a), we examine the stationarity properties of the inflation differentials. This approach has the advantage of avoiding setting arbitrarily a specific country as the benchmark economy. Our results indicate that the inflation rates converge irrespective of the monetary policy framework.
    Original languageEnglish
    Pages (from-to)285-295
    Number of pages11
    JournalJournal of International Financial Markets, Institutions and Money
    Volume31
    Early online date21 Apr 2014
    DOIs
    Publication statusPublished - 1 Jul 2014

    Keywords

    • inflation targeting
    • inflation convergence
    • pair-wise approach
    • unit roots

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